News that not only Scottish but also Northern Ireland property markets are showing renewed life has caught many by surprise. These are markets that have traditionally struggled with the likes of London and the south-east of England taking centre stage. We know the catalyst to changes in the UK market of late has been Brexit but is the market turning on its head?
The recent Royal Institute of Chartered Surveyors (RICS) survey shows continued growth in Northern Ireland and Scottish property prices. Indeed, while the likes of London and the south-east of England remain under a dark cloud, the survey suggests further improvements in Northern Ireland and Scotland should be expected. Traditionally the UK market has been split into London/south-east and the rest of the UK. This shape has not changed but the direction of property prices certainly has!
Value for money
As we have mentioned on numerous occasions, markets outside of London and the south-east of England are often been left behind when house prices rally. In relative terms they have significantly underperformed but this seems to be changing. While some experts suggest this is only a temporary aberration it is hoped that the North-South divide will at least reduce in relative terms.
One of the problems in recent times has been an over focus on capital gains. As London and the south-east are effectively the business hub of the UK they tend to attract the most investment and therefore job opportunities. As the economy begins to slow down, with uncertainty surrounding life after Brexit, this has impacted business in London and the south-east. The knock-on effect to a change in sentiment has been reduced wage inflation despite figures suggesting UK unemployment is at a record low.
Scotland and Northern Ireland
While there is no doubt that comparative value for money terms cast a favourable light on Scotland and Northern Ireland property, what does the future hold? Scotland is still in the midst of an independence push by the SNP government. Northern Ireland is seemly but a pawn in a dangerous game of poker between the UK government and European counterparts. It could be argued that price weakness in previous years has made these two markets more affordable. However, maybe, just maybe, investors have learnt a lesson since the 2008 financial crash?
We know that the UK government’s seemingly endless pursuit of property investors, which has seen an increase in taxes, has forced many to withdraw from the buy to let market. There are still numerous areas of the UK where property is unaffordable to not only first-time buyers but also those looking to climb the ladder. As a consequence, the short term reduction in buy to let investment and ever-increasing number of people seeking private lets is putting pressure on rents.
Increased competition for rental properties in the private sector, with many areas starved of social housing, has seen returns improve even during these difficult times. While it is understandable that many have left the buy to let market, as taxes continue to rise, is this sensible?
First-time buyers still require the assistance of government schemes and short-term incentives to get anywhere near the first rung of the property ladder. The employment market is becoming more mobile therefore more temporary rental accommodation is required. Local authorities have seen their budgets slashed as a consequence of austerity resulting in fewer social housing offerings. This all plays into the hands of determined long-term buy to let investors who are likely to see their rental income increase for the foreseeable future.
Has the government’s attempt to rein in the buy to let market failed dramatically?